DISCOVER HOW TO PROTECT YOUR WEALTH FROM FUTURE TAX LIABILITY
DISCOVER HOW TO PROTECT YOUR WEALTH FROM FUTURE TAX LIABILITY
Get started with a free consultation!
DISCOVER HOW TO PROTECT YOUR WEALTH FROM FUTURE TAX LIABILITY
DISCOVER HOW TO PROTECT YOUR WEALTH FROM FUTURE TAX LIABILITY
Get started with a free consultation!
"Taxes have to be paid on pre-tax retirement accounts but you don't have to use your own money for this obligation."
Uncle Sam can tax up to 85% of your Social Security Income. Some retirees refer to this as a "double tax", since the income was originally taxed to begin with.
Ask us how you may be able to reduce or eliminate income taxes on SSI.
IRMAA is a surcharge that people with retirement income above a certain amount must pay in addition to their Medicare Part B and Part D premiums. IRMAA is calculated every year. That means that if your retirement income is higher or lower year after year, your IRMAA status can change.
Uncle Sam imposes Required Minimum Distributions for pre-tax accounts beginning at age 73. Since RMDs are taxed as ordinary income increasing RMD percentages along with retirement portfolio growth will surely move you into higher marginal tax rates. In most cases over a lifetime, one should expect to pay a much higher tax bill than if they had paid all the taxes upfront.
The likelihood of both spouses passing away the same year is highly unlikely. Once your spouse has passed, this will substantially reduce your Standard Deduction, as you move from Married/Filing Joint to filing Single. This, along with losing one SS check and possibly a percentage of pension income, can put the surviving spouse in a financial bind.
Without careful planning and analysis, you may unwittingly pass on a tax problem to your kids. A growing untaxed retirement portfolio could, once inherited, bump your kids into higher marginal tax rates causing them to have to pay higher taxes on their income.
"Taxes will never be lower than what they are today."
~ David M. Walker, Former U.S. Comptroller General
In October 2022 the National Debt topped the $31 Trillion mark. Just one year later in September 2023 the Debt rose to $33 trillion, then three months later by the end of December 2023 it reached $34 trillion.
Let's put this into some perspective: It took Uncle Sam 232 years to accumulate its first $10 trillion of Debt, then just 9 years to reach $20 trillion, then another 5 years to top $30 trillion. The National Debt is accelerating at an unprecedented rate now increasing a trillion dollars every one hundred days.
One of the biggest problems is the Debt is growing faster than our country's Gross Domestic Product (GDP). The ratio of escalating Debt to GDP has never been this high in our country’s history. During World War 2 the ratio was 42% in 1941 and had risen to 106% by 1946. The ratio of U.S. Federal Debt to GDP in 1960 was 53.12%, in 1980 34.53%, in 2000 58.73%; currently 123.48%.
A recent study by Penn Wharton Budget Model, When Does the Federal Debt Reach Unsustainable Levels? published October 6, 2023, estimates that "the U.S. Debt held by the public cannot exceed 200% of GDP, even under today's favorable market conditions. Under the current policy, the United States has about 20 years for corrective action after which no amount of future tax increases or spending cuts could avoid the government defaulting on its debt."
In addition, the recent rise in interest costs to service the $34+ Trillion in National Debt has increased to the point that interest on the National Debt, currently the 4th largest Mandatory Spending item in the Federal Budget - behind Medicare/Medicaid, Social Security and Defense, will surpass Defense spending mid 2024.
Current trajectory of the increasing Debt costs will within 10 years will become the largest 'program' in the federal budget surpassing Medicare and Social Security.
Medicare is projected to become insolvent in 2028, Social Security in 2034...or sooner.
As mentioned, the National Debt crossed the $334 Trillion a the end of 2023.
Let me try to help you understand how large ONE Trillion is:
How long would it take to count to ONE Trillion…at one second per count? Take a guess...
The answer will astound you…almost 31,710 YEARS!
One Trillion is such a large number we really are unable to comprehend it.
Yet, a Trillion is tossed around by our government and the news sources without much reflection.
For example, the budget deficit in recent years routinely runs above one trillion; the government spent $2 trillion towards the Pandemic.
How High Would We Need to Tax the Rich to Balance the Budget (0% of GDP)?
Here are the highlights:
- If we tax every dollar above $400k = the tax rate would need to be 102%
- That’s not practical. So, what if we lower the threshold to:
- Tax every dollar above $250k = the top tax rate would be 90%
- That’s not practical either
- How about tax every dollar above $150k = the top tax rate would be 56%
- Nope
- So, they kept lowering the threshold till they got to:
- Top Marginal Rate at 49% if all other rates are raised an equal amount
- In this scenario all Marginal Rates would increase a minimum of 10%
Bottom Line: Virtually all Americans, except the poorest, should expect a tax increase.
* Can We Fix the Debt Solely by Taxing the Top 1%? - CRFB.org, Aug. 6, 2015
Note: This Study is dated. However, the main takeaway is that Congress will have no choice but to expand the tax base and raise taxes across the board. We've seen high tax rates before; in the '50's and half of the '60's the top marginal tax rate was a minimum of 90% and the bottom rate was 20%.
Like a massive hurricane bearing down on the coast the warning signs are clear. A lot of people are going to get hurt by the scope of the tax increases Congress will most certainly have to implement.
The math says Marginal Tax Rates will need to increase.
In a 2023 Report revealed that the
Government Must Raise Taxes 40% Or Cut Spending 30% To Achieve Fiscal Balance: Study | The Daily Wire. We all know how much the government loves to spend money, so that leaves us with raising taxes.
David Walker, former United States Comptroller General, has had much to say about the impact of Inflation and Rising Interest Rates on the cost of servicing $34 Trillion in National Debt.
David has stated:
“Congress has waited too long to solve the problem with economic growth and spending cuts alone."
"The longer Congress waits to restructure our federal finances the higher taxes are likely to go."
"Tax rates will never be lower than what they are today."
He estimates Marginal Tax Rates will need to increase a minimum of 30%.
Why should we listen to David Walker? Aside from serving as United States Comptroller General, our nation's top Accountant, he has also served in a number of other positions for our country relating to finance, including running the Government Accountability Office (GAO) and as a Public Trustee for Social Security and Medicare. He is currently serving on the Advisory Board for the Peter G. Peterson Foundation, a nonpartisan organization dedicated to addressing America’s long-term fiscal challenges to ensure a better economic future. Earlier this year David gave an eye-opening interview in the recent retirement documentary The Baby Boomer Dilemma - Official Trailer on Vimeo. If you'd like to watch the documentary email our office, and we'll arrange access.
In short, NO ONE is more familiar with our country’s finances and current fiscal challenges than David Walker.
I believe most Americans are completely unaware there is a financial tsunami headed our way, and the majority will wait until it’s too late to do anything.
This is not a new problem. David Walker has been urging America to wake up since his days as United States Comptroller General. Check out this eye-opening interview
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